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The USD/CAD pair holds steady near the 1.3900 mark during the Asian session on Tuesday, stalling the previous day’s modest pullback from a nearly two-week top. Traders, however, seem hesitant to place aggressive directional bets amid mixed fundamental cues and ahead of the key central bank event risk. Data released on Monday showed that Canada’s headline Consumer Price Index (CPI) held steady at 3% in August, matching the previous month’s reading and market forecasts. Meanwhile, the Bank of Canada’s (BoC) preferred core gauge excluding food and energy remained near the 2% target. This backs the case that the BoC will keep rates unchanged through 2026, which, along with a bullish US Dollar (USD), continues to act as a tailwind for the USD/CAD pair. Canada inflation steadies as RBC sees BoC on hold until 2027 Economists at Royal Bank of Canada note that Canadian inflation “held at 3% year-over-year in August, unchanged from July,” with “underlying inflation pressures” described as having “remained comparatively contained.” They highlight that there continued to be “limited evidence that elevated energy costs were generating significant second-round inflation,” suggesting that recent energy price moves have not yet fed broadly into the price structure. Overall, RBC judges that the August data were “broadly consistent with our base case that the Bank of Canada will hold interest rates through the remainder of 2026 before gradually raising rates in 2027 as the economy strengthens.” US Treasury bond yields hold near multi-year tops amid rising bets for an interest rate hike by the US Federal Reserve (Fed) and inflation risks stemming from elevated energy prices. This keeps the USD Index (DXY), which tracks the Greenback against a basket of currencies, near a two-week top and turns out to be another factor supporting the USD/CAD pair. USD bulls, however, opt to wait…